Target thinks small to succeed big time
Target’s push to open smaller locations in recent years has been one of the chain’s success stories. It’s worked so well that the retailer is thinking of developing even smaller stores, so that one day it will be able to have locations almost anywhere.
Speaking on yesterday’s fourth-quarter earnings call, CEO Brian Cornell said that Target plans to open more of its smaller-format stores, which typically span about 30,000-square-feet, this year in urban centers, near/on college campuses and in tourist areas such as Disney World, the Las Vegas Strip and New York’s Times Square.
“We’re fine tuning our approach with each project. Like any new neighborhood, you have to really live in it to figure out the daily rhythms and routines,” said Mr. Cornell. “In Tribeca, for example, we knew there would be a steady stream of office workers over the lunch hour and tourists on weekends, but we didn’t realize just how much room we’d need to accommodate all the double jogger strollers in our aisles. Trust me, they’re huge.”
Target’s CEO said the retailer individualizes its merchandising, replenishment and operational strategies for each small store location and the results are worth the effort. The chain’s existing 100 small-format stores have moved “well past” $1 billion in annual sales, generating about three times the revenue per square foot as its big boxes.
John Mulligan, Target’s COO, said the retailer has learned a lot about operating small stores, taking a slow and steady approach since its first in 2014. In 2020, he said, Target will open around “three dozen” stores, its most ever in a calendar year, and that the retailer is looking to see “just how small our stores can be.”
Speaking to analysts, Mr. Mulligan said Target wasn’t talking about introducing a completely new concept, but a tweak to its small store format that would give it greater accessibility to shoppers.
“While our smallest location today is about 12,000 square feet, our team is exploring sites half that size. Think a convenience store size box nestling neighborhoods across Chicago, Philadelphia or New York or right in the middle of a bustling campus,” he said. “We’re still in a space to offer the categories guests want from Target, like beauty, home and grab-and-go food. This design could open up hundreds of additional site options to serve even more people in new trade areas, and to give guests a nearby pickup spot for online orders.”
Target plans to debut its first smaller box store next year.
DISCUSSION QUESTIONS: Has Target’s experience operating stores between 12,000- and 30,000-square-feet prepared it to succeed with even smaller locations? What do you think of Target’s plan to begin testing a 6,000-square-foot store in 2021?